I've got a daughter in grade 1. Cute as a button and pretty darn smart (I fear the comparison may be self relative). Swinging on the right side of the political / philosophical spectrum, I am well aware of the left wing bias in our school system. Although I haven't seen much (except for my post "It's all about the children"), I have a friend with a daughter in grade 5.
My friend went to his daughter's school concert recently and was wee bit annoyed with the content. They sang a song where the chorus was "Do you dream of peace"? The chorus was repeated ad nauseam. The message was loud and clear and I don't want my daughter learning it. War is always wrong, never justified and we should resolve our conflicts by dialogue.
As I watched the movie Saving Private Ryan I was thinking what would happen to the teacher who produced this concert in 1942. The parents would have shouted "we dream of victory" and beat the daylights out of the teacher. I would ask the current teacher do you dream of peace or do you want to be left in peace. Peace can come instantly through surrender.
Will my daughter be taught that nothing in life is worth dying for? If so, when did this begin? As Reagan said in his 1964 speech, "should Christ have refused the cross, did the fallen allies in WW2 die in vain, should slaves accept slave masters.
I will teach my daughter that the concept of peace at any price is wrong. The world has a history of war and we have and will have enemies. If we can avoid war great; but there are some lines the enemy can't cross.
Right on
Tuesday, March 31, 2009
Thursday, March 26, 2009
Ontario Budget
"•Cutting personal income tax rate from 6.05% to 5.05% on the first $36,848. Rates for next two categories ($36,848 - $73,698 and greater than $73,698) stay the same, at 9.15% and 11.16%."
I love the rich. One day I hope to be one. The rich pay most of the tax. The top 10% of income earners pay something like 40% of total tax revenue. The bottom 50% pay something like 10%. Hug the rich; they pay the bills!
Why are the rich rich? Because they work hard and smart. They are highly productive people. Sure some inherit their wealth but most earn it.
The Ontario government is cutting tax the typical way. They are lowering tax rates at the bottom of the income spectrum and leaving rates at the top as is. (I am pleasantly surprised they didn't raise them). If the goal is to reignite an economy, the opposite should be done. Or, cut tax rates accross the income spectrum by the same percentage amount. For example, cut all rates by 10%.
Income tax is a disincentive to earn income. The higher the tax the greater the disincentive. A progressive tax increases the disincentive as income rises. In Ontario, income over approximately $126,000 is taxed at 46%. Talk about disincentive! Why not decrease the disincentive (increase the incentive) to work and invest for the most productive in society. Long live supply side economics!
Right On
I love the rich. One day I hope to be one. The rich pay most of the tax. The top 10% of income earners pay something like 40% of total tax revenue. The bottom 50% pay something like 10%. Hug the rich; they pay the bills!
Why are the rich rich? Because they work hard and smart. They are highly productive people. Sure some inherit their wealth but most earn it.
The Ontario government is cutting tax the typical way. They are lowering tax rates at the bottom of the income spectrum and leaving rates at the top as is. (I am pleasantly surprised they didn't raise them). If the goal is to reignite an economy, the opposite should be done. Or, cut tax rates accross the income spectrum by the same percentage amount. For example, cut all rates by 10%.
Income tax is a disincentive to earn income. The higher the tax the greater the disincentive. A progressive tax increases the disincentive as income rises. In Ontario, income over approximately $126,000 is taxed at 46%. Talk about disincentive! Why not decrease the disincentive (increase the incentive) to work and invest for the most productive in society. Long live supply side economics!
Right On
Tuesday, March 24, 2009
Let's Create Jobs
I have a plan that will create jobs and a new industry in Canada.
We in Canada produce very little sugar. We should change this and develop an industry that will create home grown sugar for domestic and foreign consumption and provide well paying jobs for Canadians.
Canada has never had the climate to grow sugar cane and have therefore never had a sugar industry. But, with technology we can circumvent our climate constraints. We have the technology to build greenhouses that can house the climate necessary to grow sugar cane.
The government should embark upon a program that pays for the construction of sugar cane growing ready greenhouses and to hire staff necessary to grow it. This creates construction, administration, marketing, and executive jobs and creates demand for feeder industry and expertise.
Of course, a new industry will need some help to produce a competitive product. Foreign producers have a climate advantage that we can't compete against. For this reason, I suggest a series of subsidies and tarriffs. Subsidies will have the effect of paying some of the cost thereby allowing our sugar company to sell product profitably at a lower price than possible without the subsidy. Tarriffs increase the price of foreign sugar sold in Canada. This increases the competitive position of our greenhouse sugar to Canadians. Canadian sugar on Canadian tables!
There is very little downside to my plan. The upside is obvious. More jobs and a new industry.
Oh yes, that is correct...subsidies come from the tax Canadians pay. We may have to raise tax to finance the subsidies. Tarriffs raise the price of foreign sugar for all Canadians and allows our company to raise its price. Yes, Canadians will be poorer and be paying more for sugar but don't be a downer. We have created a new industry. Yes, it is possible that the nations that export sugar may be unhappy with what we propose. And it is possible that they may retaliate with tarriffs on our exported products. And they may try to create industries that we excel at thereby harming us.
Come to think of it...my plan is CRAP!
Right On
We in Canada produce very little sugar. We should change this and develop an industry that will create home grown sugar for domestic and foreign consumption and provide well paying jobs for Canadians.
Canada has never had the climate to grow sugar cane and have therefore never had a sugar industry. But, with technology we can circumvent our climate constraints. We have the technology to build greenhouses that can house the climate necessary to grow sugar cane.
The government should embark upon a program that pays for the construction of sugar cane growing ready greenhouses and to hire staff necessary to grow it. This creates construction, administration, marketing, and executive jobs and creates demand for feeder industry and expertise.
Of course, a new industry will need some help to produce a competitive product. Foreign producers have a climate advantage that we can't compete against. For this reason, I suggest a series of subsidies and tarriffs. Subsidies will have the effect of paying some of the cost thereby allowing our sugar company to sell product profitably at a lower price than possible without the subsidy. Tarriffs increase the price of foreign sugar sold in Canada. This increases the competitive position of our greenhouse sugar to Canadians. Canadian sugar on Canadian tables!
There is very little downside to my plan. The upside is obvious. More jobs and a new industry.
Oh yes, that is correct...subsidies come from the tax Canadians pay. We may have to raise tax to finance the subsidies. Tarriffs raise the price of foreign sugar for all Canadians and allows our company to raise its price. Yes, Canadians will be poorer and be paying more for sugar but don't be a downer. We have created a new industry. Yes, it is possible that the nations that export sugar may be unhappy with what we propose. And it is possible that they may retaliate with tarriffs on our exported products. And they may try to create industries that we excel at thereby harming us.
Come to think of it...my plan is CRAP!
Right On
Sunday, March 22, 2009
My favorite movie Starring Ronald Reagan.
I think this is his best work. Sit back, relax, and enjoy the next half hour. It is remarkably relevant today.
www.youtube.com/watch?v=yt1fYSAChxs
Right On
www.youtube.com/watch?v=yt1fYSAChxs
Right On
The Tyranny of the Special Interest Group
The strongest influence on a politician is exercised by the lobbying of special interest groups. The goal of a special interest group is to confer substantial benefits to its membership and have the cost of these benefits spread thinly accross the population. The goal of the politician is to secure the block of voters who comprise the special interest group without losing votes from the rest of the population. Both the politician and the members of the special interest group gain from the relationship at the expense of the population. It is a relationship without much of natuaral check or balance. The result is a poorer population.
Both the special interest group and the politician rely on the rational apathy of the population. The key word is rational. I'll use milk farmers as a an example. If the government mandates a 5% increase in the price of milk and the proceeds given to milk farmers, milk farmers gain a 5% increase in their revenue (I am ignoring the fact that some consumers will choose to substitute other products for milk as a result of the price hike). I am out a only small sum as milk comprises a small portion of my expenses. Let's pretend that a 5% increase in the price of milk raises my total expenses by .1% The milk farmer gains substantially more than I have to lose. What is my rational response to a 5% increase in the price of milk? Not much because it doesn't affect me greatly. The politician relies on this.
Rational apathy is at work. I can devote time and resources lobbying the government to remove the mandated hike, but this is irrational. My gain with a successful lobbying effort is small. My time and resources are better spent on other things. Compare this to the milk farmer. His lobbying efforts brought him a 5% increase in revenue. The return from his lobbying effort is substantial. His lobbying effort is rational. The politician acts rationally by conferring benefits to milk farmers. He gains or secures their vote without much risk of losing mine.
The problem is that there are many special interest groups. Each has as its goal confering benefits on its members while spreading the costs thinly accross the population. These costs add up! The members who don't belong to a special interest group (largely T4 income earners who work outside of the public sector) pay dearly for these benefits. We pay through high taxes and higher prices due to tarrifs and subsidies. As an example, read my previous post "It's About The Children" and consider how and who pays these salaries and benefits.
There is only one solution. We who don't belong to a special interest group must group and act like one. Politicians who succumb to the desires of other special interest groups will lose our vote. The Canadian Taxpayers Federation would be a good grouping mechanism.
Right On
Both the special interest group and the politician rely on the rational apathy of the population. The key word is rational. I'll use milk farmers as a an example. If the government mandates a 5% increase in the price of milk and the proceeds given to milk farmers, milk farmers gain a 5% increase in their revenue (I am ignoring the fact that some consumers will choose to substitute other products for milk as a result of the price hike). I am out a only small sum as milk comprises a small portion of my expenses. Let's pretend that a 5% increase in the price of milk raises my total expenses by .1% The milk farmer gains substantially more than I have to lose. What is my rational response to a 5% increase in the price of milk? Not much because it doesn't affect me greatly. The politician relies on this.
Rational apathy is at work. I can devote time and resources lobbying the government to remove the mandated hike, but this is irrational. My gain with a successful lobbying effort is small. My time and resources are better spent on other things. Compare this to the milk farmer. His lobbying efforts brought him a 5% increase in revenue. The return from his lobbying effort is substantial. His lobbying effort is rational. The politician acts rationally by conferring benefits to milk farmers. He gains or secures their vote without much risk of losing mine.
The problem is that there are many special interest groups. Each has as its goal confering benefits on its members while spreading the costs thinly accross the population. These costs add up! The members who don't belong to a special interest group (largely T4 income earners who work outside of the public sector) pay dearly for these benefits. We pay through high taxes and higher prices due to tarrifs and subsidies. As an example, read my previous post "It's About The Children" and consider how and who pays these salaries and benefits.
There is only one solution. We who don't belong to a special interest group must group and act like one. Politicians who succumb to the desires of other special interest groups will lose our vote. The Canadian Taxpayers Federation would be a good grouping mechanism.
Right On
Saturday, March 14, 2009
It's About The Children
In 2004 an income of $89,000 was enough to place an individual in the top 5% of our country's income earners. www.statcan.gc.ca/daily-quotidien/070924/dq070924a-eng.htm. Inflating that figure by 2.5%, a rough proxy for inflation for the last 5 years, gives a threshold of $100,700 to join the top 5% club in 2009.
Thanks to the website of the Elementary Teachers Federation of Ontario, we find this http://www.etfo.ca/BargainingandAgreements/comparingagreements/Pages/default.aspx. Currently a teacher with 11 years of experience in Peel region (a 'burb of Toronto) earns $84,088. I estimate that a teacher has 3 months off. I'll give them one month of holiday and the rest is non-work. $84,088 for 10 months of work equates to $100,900 for 12 months of work.
A teacher's starting salary is $45,744 and grows each year until they reach the maximum of $84,088 11 years later. Every year the grid moves higher with inflation and gains from collective bargaining. For example, the starting - maximum amounts for 2005/2006 were $43,467 -$79,073 and for 2006/2007 were $44,315 - 81,461. I am not sure what their pension benefit is but I bet it is generous. I know it is a defined benefit pension plan meaning they get a percentage of their ending salary for the rest of their life.
I don't begrudge anyone for making a nice salary, especially if I am not paying for it. But, there is too much wrong with the structure of a teacher's remuneration in Ontario that it is worth commenting. Firstly, should teachers earn at the top 5% of income earners? I have a problem with that. It is a tough job with responsibility but so is every job that pays in the top 5% bracket. Secondly, they need to realize the extent of their remuneration. Many teachers complain. This needs to stop. Thirdly, 11 years to maximum salary is a massive benefit. At some point, I will reach my maximum salary. I would have been substantially better off if I reached the maximum 11 years after starting my career. The average teacher will reach maximum earnings at the age of 36. Forthly, they get the two best weather months off.
The power of their union is immense and it amounts to a large special interest group (more on the evils of special interest groups to come in another post). Politicians battle the teacher's union at consederable risk. Ask Mike Harris. There are roughly 170,000 teachers in Ontario out of 12,000,000 Ontarians of all ages. When teacher's say "We need smaller classes" I hear "we want more teachers to make our union even stronger". The politician who secures the blessing of the teacher's union drastically enhances the chance of winning the election and vice versa. But, who has my back?
Teachers and their union are responsible for a large transfer of wealth from the private sector to the (psudo) public sector. This eventually has to be dealt with and scaled back.
RIGHT ON
Thanks to the website of the Elementary Teachers Federation of Ontario, we find this http://www.etfo.ca/BargainingandAgreements/comparingagreements/Pages/default.aspx. Currently a teacher with 11 years of experience in Peel region (a 'burb of Toronto) earns $84,088. I estimate that a teacher has 3 months off. I'll give them one month of holiday and the rest is non-work. $84,088 for 10 months of work equates to $100,900 for 12 months of work.
A teacher's starting salary is $45,744 and grows each year until they reach the maximum of $84,088 11 years later. Every year the grid moves higher with inflation and gains from collective bargaining. For example, the starting - maximum amounts for 2005/2006 were $43,467 -$79,073 and for 2006/2007 were $44,315 - 81,461. I am not sure what their pension benefit is but I bet it is generous. I know it is a defined benefit pension plan meaning they get a percentage of their ending salary for the rest of their life.
I don't begrudge anyone for making a nice salary, especially if I am not paying for it. But, there is too much wrong with the structure of a teacher's remuneration in Ontario that it is worth commenting. Firstly, should teachers earn at the top 5% of income earners? I have a problem with that. It is a tough job with responsibility but so is every job that pays in the top 5% bracket. Secondly, they need to realize the extent of their remuneration. Many teachers complain. This needs to stop. Thirdly, 11 years to maximum salary is a massive benefit. At some point, I will reach my maximum salary. I would have been substantially better off if I reached the maximum 11 years after starting my career. The average teacher will reach maximum earnings at the age of 36. Forthly, they get the two best weather months off.
The power of their union is immense and it amounts to a large special interest group (more on the evils of special interest groups to come in another post). Politicians battle the teacher's union at consederable risk. Ask Mike Harris. There are roughly 170,000 teachers in Ontario out of 12,000,000 Ontarians of all ages. When teacher's say "We need smaller classes" I hear "we want more teachers to make our union even stronger". The politician who secures the blessing of the teacher's union drastically enhances the chance of winning the election and vice versa. But, who has my back?
Teachers and their union are responsible for a large transfer of wealth from the private sector to the (psudo) public sector. This eventually has to be dealt with and scaled back.
RIGHT ON
Tuesday, March 10, 2009
Supply Side Economics - The Free Lunch
Canada has yet to have a meaningful discussion about Supply Side Economics and we are poorer as a result. There is a free lunch and it is called supply side economics.
Supply side economics has as its foundation that individuals are rational and incentives and disincentives matter and affect behaviour on the margin. Out of this arose the famous Laffer curve.
The Laffer curve simply makes sense. At a 0% tax rate the government has no revenue. If tax rates rise, government revenue rises but only to a certain point. Once that point is reached, increases in tax rates actually reduce government revenue. At a 100% tax rate the government has no revenue. Who would work if after-tax income is $0? The Laffer curve states that at high (marginal) tax rates, a reduction in the tax rate actually increases government revenue.
Why? Taxes are a disincentive to earn employment income (or interest income, or dividends, or capital gains). Lower the disincentive to earn income and you get more people who want earn income (work). Lower the disincentive to invest and you get more business, savings (earning interest income), and investment. The two add up to a greater desire to work and a greater demand for workers (more people working harder and more people working).
The criticism about supply side economics is that it is tax cuts for the rich and that this creates a greater inequity between the rich and the poor. The response is ask a poor person what they want, greater equality or more money, and they rationally choose more money every time.
Every time it has been tried (both Kennedy and Reagan slashed taxes, Ireland, New Zealand,…) it has worked. “Worked” is defined as an increase in government revenue after tax cuts. With Ontario’s high marginal tax rates (46% federal and provincial combined rate on income over $126,000), Ontario is a prime candidate for a supply side tax cut. Let's eat the free lunch.
Right On(tario)
Supply side economics has as its foundation that individuals are rational and incentives and disincentives matter and affect behaviour on the margin. Out of this arose the famous Laffer curve.
The Laffer curve simply makes sense. At a 0% tax rate the government has no revenue. If tax rates rise, government revenue rises but only to a certain point. Once that point is reached, increases in tax rates actually reduce government revenue. At a 100% tax rate the government has no revenue. Who would work if after-tax income is $0? The Laffer curve states that at high (marginal) tax rates, a reduction in the tax rate actually increases government revenue.
Why? Taxes are a disincentive to earn employment income (or interest income, or dividends, or capital gains). Lower the disincentive to earn income and you get more people who want earn income (work). Lower the disincentive to invest and you get more business, savings (earning interest income), and investment. The two add up to a greater desire to work and a greater demand for workers (more people working harder and more people working).
The criticism about supply side economics is that it is tax cuts for the rich and that this creates a greater inequity between the rich and the poor. The response is ask a poor person what they want, greater equality or more money, and they rationally choose more money every time.
Every time it has been tried (both Kennedy and Reagan slashed taxes, Ireland, New Zealand,…) it has worked. “Worked” is defined as an increase in government revenue after tax cuts. With Ontario’s high marginal tax rates (46% federal and provincial combined rate on income over $126,000), Ontario is a prime candidate for a supply side tax cut. Let's eat the free lunch.
Right On(tario)
Thursday, March 5, 2009
Why socialism doesn't work.
Socialism does not work. Why not? The average wage in society is lower due to socialism and everyone has to make do. Socialism destroys wealth. Socialism has many definitions but the one I am using is a redistribution of income from those who have it to those who don't. Ultimate socialism would be determining the average wage, taxing those who make over it down to the average wage, and subsidizing those who earn below it up to the average wage. The problem with ultimate socialism is that those who earn over the average wage have no incentive to keep earning if it will be taxed away. Once they earn up to the average wage they will choose leisure over work. The average wage then falls. Incentives matter and greatly. Socialism does reduce the gap between the rich and the poor. Unfortunately, it does so by making everyone poorer. Socialism is a scaled down version of ultimate socialism. It doesn't work either but collapses slower.
The bottom line is that if you take away more from people who work and give more to people who don't work the result will be less work. For both rich and poor the incentive is to work less.
Right on
The bottom line is that if you take away more from people who work and give more to people who don't work the result will be less work. For both rich and poor the incentive is to work less.
Right on
Wednesday, March 4, 2009
Who Pays For Cap & Trade?
Who pays for Cap and Trade? I work for a non-unionized company in Canada. I receive employment income. Who is going to pay for Cap and Trade or any of the carbon reducing initiatives? Me, and the vast majority of people who work for non-unionized profit-motivated companies.
Business has predominantly one goal and that is to create profit. This is as it should be. Competition keeps them honest. Business has revenue and cost with the difference being profit. It is universally agreed that any carbon reducing initiative is going to increase the cost of energy. Most businesses have an energy cost. Some are large and some small but all have the cost. What will business do if the cost of energy rises substantially? Due to the profit motive, business will pass on at least a portion of the added cost to the consumer. They have no choice. As an example, if revenue remains stable but cost rises 10% the business generates less profit. Assuming that competition is fierce, which it always is in a free market, there is little room to absorb the reduction in profit. The competition has to do the same.
Why do I pay for it? A hike in price of a good or service due to hike in cost is a one-time inflationary event. A hike in the price of all goods and services is a big-time one-time event. If prices for everything go up 10%, inflation goes up 10%. My employer and most employers will be reluctant to increase my wage, which is another cost to my employer. This is especially true if profit is falling. What about the unionized worker and the public service worker? They will bargain for a cost of living increase. Cost of living increases may already be written in their contract. If prices rise 10% they will get a 10% raise (and probably something on top of that). They are no worse off after the inflationary event. I am. I won't get the raise. My company will be in no position to offer CPI offsetting raises. If inflation jumps 10% and my salary doesn't, I am 10% worse off. I pay for the carbon reduction initiative.
I have a proposal. I will agree to the situation if public sector employees and unionized employees forgo cost of living increases for a certain period after the carbon reduction initiative is implemented. If so, they may not be so welcoming of its implementation. This levels the playing field.
Right On
Business has predominantly one goal and that is to create profit. This is as it should be. Competition keeps them honest. Business has revenue and cost with the difference being profit. It is universally agreed that any carbon reducing initiative is going to increase the cost of energy. Most businesses have an energy cost. Some are large and some small but all have the cost. What will business do if the cost of energy rises substantially? Due to the profit motive, business will pass on at least a portion of the added cost to the consumer. They have no choice. As an example, if revenue remains stable but cost rises 10% the business generates less profit. Assuming that competition is fierce, which it always is in a free market, there is little room to absorb the reduction in profit. The competition has to do the same.
Why do I pay for it? A hike in price of a good or service due to hike in cost is a one-time inflationary event. A hike in the price of all goods and services is a big-time one-time event. If prices for everything go up 10%, inflation goes up 10%. My employer and most employers will be reluctant to increase my wage, which is another cost to my employer. This is especially true if profit is falling. What about the unionized worker and the public service worker? They will bargain for a cost of living increase. Cost of living increases may already be written in their contract. If prices rise 10% they will get a 10% raise (and probably something on top of that). They are no worse off after the inflationary event. I am. I won't get the raise. My company will be in no position to offer CPI offsetting raises. If inflation jumps 10% and my salary doesn't, I am 10% worse off. I pay for the carbon reduction initiative.
I have a proposal. I will agree to the situation if public sector employees and unionized employees forgo cost of living increases for a certain period after the carbon reduction initiative is implemented. If so, they may not be so welcoming of its implementation. This levels the playing field.
Right On
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